MPC Voting, Forecasting and Inflation
This paper considers the effectiveness of monetary policy committee voting when the inflation forecast signals, upon which decisions are based, may be subject to manipulation. Using a discrete time intertemporal model, we examine the distortions resulting from such manipulation under a three-way voting system, similar to that used by the Bank of Sweden. We find that voting itself creates persistence in inflation. Whilst altering the forecast signal, even if well intentioned, results in a diminished probability of achieving the inflation target. However, if committee members ‘learn’ in a Bayesian manner, this problem is mitigated.
|Date of creation:||Oct 2012|
|Date of revision:||Jan 2013|
|Contact details of provider:|| Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK|
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC
|Order Information:|| Web: http://www2.le.ac.uk/departments/economics/research/discussion-papers Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Henry W. Chappell, Jr. & Rob Roy McGregor & Todd A. Vermilyea, 2007. "The Role of the Bias in Crafting Consensus: FOMC Decision Making in the Greenspan Era," International Journal of Central Banking, International Journal of Central Banking, vol. 3(2), pages 39-60, June.
- Jan Marc Berk & Beata K. Bierut, 2005. "On the Optimality of Decisions made by Hub-and-Spokes Monetary Policy Committees," DNB Working Papers 027, Netherlands Central Bank, Research Department.
- Faust, Jon, 1996. "Whom can we trust to run the Fed? Theoretical support for the founders' views," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 267-283, April.
- Berk, Jan Marc & Bierut, Beata K., 2009.
"Monetary Policy Committees: meetings and outcomes,"
Working Paper Series
1070, European Central Bank.
- Weber, Anke, 2008.
"Communication, decision-making and the optimal degree of transparency of monetary policy committees,"
Discussion Paper Series 1: Economic Studies
2008,02, Deutsche Bundesbank, Research Centre.
- Anke Weber, 2010. "Communication, Decision making, and the Optimal Degree of Transparency of Monetary Policy Committees," International Journal of Central Banking, International Journal of Central Banking, vol. 6(3), pages 1-49, September.
- Eijffinger, Sylvester C W & Tesfaselassie, Mewael F., 2005.
"Central Bank Forecasts and Disclosure Policy: Why it Pays to be Optimistic,"
CEPR Discussion Papers
4854, C.E.P.R. Discussion Papers.
- Eijffinger, Sylvester & Tesfaselassie, Mewael F., 2007. "Central Bank forecasts and disclosure policy: Why it pays to be optimistic," European Journal of Political Economy, Elsevier, vol. 23(1), pages 30-50, March.
- Eijffinger, S.C.W. & Tesfaselassie, M.F., 2007. "Central bank forecasts and disclosure policy : Why it pays to be optimisitic," Other publications TiSEM 22defe88-78bb-439d-9a38-8, Tilburg University, School of Economics and Management.
- Timothy Besley & Neil Meads & Paolo Surico, 2008.
"Insiders versus Outsiders in Monetary Policymaking,"
American Economic Review,
American Economic Association, vol. 98(2), pages 218-223, May.
- Besley, Timothy & Meads, Neil & Surico, Paolo, 2007. "Insiders versus Outsiders in Monetary Policy-Making," Discussion Papers 20, Monetary Policy Committee Unit, Bank of England.
- Timothy Besley & Neil Meads & Paolo Surico, 2008. "Insiders versus outsiders in monetary policymaking," LSE Research Online Documents on Economics 33743, London School of Economics and Political Science, LSE Library.
- Blinder, Alan S., 2007.
"Monetary policy by committee: Why and how?,"
European Journal of Political Economy,
Elsevier, vol. 23(1), pages 106-123, March.
- Alan Blinder, 2006. "Monetary Policy by Committee: Why and How?," DNB Working Papers 092, Netherlands Central Bank, Research Department.
- Alan S. Blinder, 2005. "Monetary Policy by Committee: Why and How?," Working Papers 84, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Franz Dietrich & Christian List, 2002. "A Model of Jury Decisions Where All Jurors Have the Same Evidence," Economics Papers 2002-W23, Economics Group, Nuffield College, University of Oxford.
- Aleksander Berentsen & Gabriele Camera & Christopher Waller, 2005.
"Money, Credit and Banking,"
CESifo Working Paper Series
1617, CESifo Group Munich.
- Aleksander Berentsen & Gabriele Camera & Christopher Waller, "undated". "Money, Credit and Banking," IEW - Working Papers 219, Institute for Empirical Research in Economics - University of Zurich.
- Aleksander Berentsen & Gabriele Camera, 2004. "Money, Credit, and Banking," 2004 Meeting Papers 473, Society for Economic Dynamics.
- Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 649-665.
- Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
- Brooks, Robert & Harris, Mark & Spencer, Christopher, 2007. "An Inflated Ordered Probit Model of Monetary Policy: Evidence from MPC Voting Data," MPRA Paper 8509, University Library of Munich, Germany.
- Glenn D. Rudebusch, 2001.
"Is The Fed Too Timid? Monetary Policy In An Uncertain World,"
The Review of Economics and Statistics,
MIT Press, vol. 83(2), pages 203-217, May.
- Glenn D. Rudebusch, 1999. "Is the Fed too timid? Monetary policy in an uncertain world," Working Papers in Applied Economic Theory 99-05, Federal Reserve Bank of San Francisco.
- Jan Marc Berk & Beata K. Bierut, 2005. "Communication in Monetary Policy Committees," DNB Working Papers 059, Netherlands Central Bank, Research Department.
- Serguei Kaniovski, 2010. "Aggregation of correlated votes and Condorcet’s Jury Theorem," Theory and Decision, Springer, vol. 69(3), pages 453-468, September.
- Gerlach-Kristen, Petra, 2006. "Monetary policy committees and interest rate setting," European Economic Review, Elsevier, vol. 50(2), pages 487-507, February.
When requesting a correction, please mention this item's handle: RePEc:lec:leecon:12/23. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo)
If references are entirely missing, you can add them using this form.